CAPITAL IDEAS

TBY talks to Nasama Massinda, CEO of the Capital Markets and Securities Authority (CMSA), on the financial environment and integration.

BIOGRAPHY

Nasama Massinda is currently the CEO of CMSA. At a regional level, she has worked on East Africa capital market integration initiatives through the East Africa Securities Regulatory Authorities (EASRA), where she chaired the Legal Issues Sub Committee. In the Southern Africa Development Cooperation Region (SADC), she is involved in capital market harmonization activities and was the Chairperson of the SADC Committee of Insurance, Securities, and Non-Bank Financial Authorities (CISNA) from 2007 to 2009. Internationally, Massinda has, among other things, led a CMSA assessment team whose output resulted in the CMSA being admitted in April 2011 as a full member of the International Organization of Securities Regulators (IOSCO). She holds a Bachelor’s Degree in Law from the University of Dar es Salaam and a Master’s Degree in Business Administration from the University of Strathclyde, Scotland.

How do you balance market liberalization and protectionism in your regulatory approach?

From the regulatory perspective, we need to exercise cautious and be balanced. That has been the approach taken by Tanzania. Capital account liberalization is a Bank of Tanzania issue, but, being in the financial sector, it affects us as well. For example, Tanzanians cannot buy shares in a foreign country unless they have obtained a source of finance from outside the country. That is certainly restrictive for us. In addition, on the capital markets side, we are working toward being more cautious during our build-up phase, because there are certain restrictions. For example, foreigners can own a maximum of 60% of a company's shares, especially those subject to privatization. In the event that Tanzanians are able to cover more than 40%, priority will be given to them; the philosophy is to empower local businesspeople. However, it has been over 15 years since we began operations, and we find that there is demand to open up further. The brokers are receiving orders from abroad from people who want to buy shares of companies that are listed on the stock exchange, but they face the 60% cap. We are heeding that call and have agreed that we should open up the market. We are participating in proposals on how to liberalize the accounts. The CMSA is going to be part of a gradual process that should open up the market by 2015.

What new capital market products are you introducing?

The idea of introducing an enterprise growth market came about due to the perceived the lack of liquidity. There are very few companies listed on the exchange, so we conducted a study to see why. We interviewed a number of potential issuers, went outside the country, and concluded that we needed another segment of the market with different listing requirements. That is how we came up with the idea of having a second tier in the market, and we named it “the enterprise growth market." We didn't want to portray the idea that one segment was a lesser entity, but instead championed the idea of having a different segment for alternative kinds of issuers. We have devised the regulatory framework, and recently completed training for nominated advisors. There are entities that we hope will be able to seek out companies keen to issue shares to the public and then nurture them for public offer and eventual listing. The enterprise growth market is essentially designed for startups, SMEs, or companies that have no track record. They are companies in which the promoters have good ideas but lack funds. We are giving them the opportunity to source funding through the capital markets and also providing an exit mechanism for those people willing to take risks.

What steps are being taken to encourage the free flow of capital?

Capital markets regulators in East Africa started working on integration issues long ago. We started in 1996 by forming the East Africa Securities Regulators forum. It comprised Tanzania, Uganda, and Kenya, but has since expanded to include Rwanda and Burundi. Even in the East African community, people use Tanzania as a role model. We have achieved harmonization to facilitate advancement, as embodied by the integrated regulatory framework. We have a number of harmonized regulations, with one resulting in the cross listing of securities. There are companies that are cross-listed in four countries, with Burundi the only exception since it lacks both a stock exchange and regulator. We have implemented legislation in the regulatory framework that has been harmonized, and we recently developed a requirement for the issuance of regional bonds.